What your B2B firm can learn from Autodesk moving from licensing to subscription model

Software veteran Autodesk is changing its business model and its technology as it adapts to the changes in its industry. It will move to a subscription model and connect its services to the cloud.

It’s no doubt a huge move for a company that’s been in the game a long time — Autodesk debuted in 1982 and the company went public in 1990. As it switches to selling subscriptions instead of licenses and begins to integrate its desktop applications into the cloud, it is also fundamentally changing the way it does business. And can offer a lesson to any B2B firm that is considering moving to a subscription model too.

Going subscription-based could be a win-win for Autodesk and its customers; no longer will customers have to wait for potentially years for a new edition of the software. Instead, incremental updates can make the 3D modelling program better and better.

The transition will also see Autodesk embracing the cloud to a greater extent, though the company isn’t planning on getting rid of its desktop applications completely. Instead, the apps will “become cloud connected, cloud aware and cloud-centric,” as Scott Reese, VP of cloud products at Autodesk, told TechCrunch.

The importance of cloud computing for Autodesk can’t be understated — it will help make 3D modeling more accessible to those without a graphically powerful computer, and it also allows for the company to create more customized tools as needed rather than the same product ad infinitum. Autodesk launched Forge.com, a cloud development platform, to encourage users to create more “connected” tools.

Autodesk will also change its development approach to accommodate the subscription model. Its usual course of action has been the Waterfall model of development, building each part of its software sequentially, with a timeline of months to years. It will now switch to an agile model, where incremental changes are made in a matter of weeks.

The company’s quest to reorient itself is not without its casualties; last week it laid off 925 employees — 10 percent of its workforce — to make itself leaner as it moves to the subscription model. However, past efforts by other companies have shown moving from licensing to subscriptions can be done well.

Screenshot of Autodesk in action

In 2013, Adobe began the process, and by 2014, despite a number of complaints following its initial announcement, the switch seemed to have worked. It posted record quarterly revenues for the 2015 fiscal year. It may still have some learning to do, however, as a report from Hexus notes that cancelling a subscription to Adobe’s services can be difficult.

Cloud software is expected to reach $100 billion in revenue by 2018, according to IDC. Based on that stat alone, it’s unlikely the subscription model will be going anywhere anytime soon.

Subscriptions also provide several benefits to vendors. The recurring revenue is an obvious plus — companies no longer need to worry about cyclical revenue streams, as Mikael Thorsen of Lenovo writes. Long-term contracts mean competitors are less likely to lure customers away, and such lengthy relationships will also give companies more opportunities to upsell customers on additional services.

It’s also easier on the customers — Autodesk licenses can cost anywhere from $1,200 to $6,825, whereas a fee split over 12 months becomes a lot more affordable.

That said, it will be up to each B2B company to decide whether a move towards this model is the right decision and then to come up with a reasonable monthly fee (usually the cost of a perpetual license split over 36 months on a per-user basis). If incremental changes aren’t improving functionality or productivity, a monthly fee can end up costing more than a one-time license purchase and lead to cancelled subscriptions.

Michael Thomas

Michael Thomas is a staff editor at Digital Journal Inc. He is a graduate from Ryerson University's School of Journalism in Toronto. He also founded Grayowl Point, a Canadian music blog that's been online since 2009.